New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on January 15, 2002, representing the position of the New York State Insurance Department.

Re: Filing Requirements for Private Placement of Surplus Notes

Question Presented:

Other than N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(c) (1995) (Regulation 44) requirement that a copy of the offering memorandum be filed within 30 days of the commencement of the offering, are there any other filing requirements in the New York Insurance Law with respect to private placement of surplus notes by an unlicensed foreign mutual insurer?

Conclusion:

With respect to private placement of surplus notes by an unlicensed foreign mutual insurer, other than N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(c) (1995) (Regulation 44) requirement that a copy of the offering memorandum be filed within 30 days of the commencement of the offering, there are no other filing requirements in the New York Insurance Law.

Facts:

The Inquirer states:

We are representing an investment bank in underwriting surplus notes of a Florida mutual insurer. The placement will be done as a Rule 144A, or a private placement, only to the category of people listed in Section 7.2(a)(5) of Regulation No. 44. We would like to confirm that other than filing a copy of the offering memorandum pursuant to Section 7.2(c) within 30 days of the commencement of the offering, there are no other filing requirements in NY with respect to the placement.

Analysys:

N.Y. Ins. Law 1204 (McKinney 2000) regulates sales of insurance securities, to the public. That section prohibits a person, firm, association or corporation from offering or selling securities of an unauthorized insurer in this State unless a license has been granted permitting such sale or unless the securities are exempt from the provisions of that section.

Specifically, N.Y. Ins. Law 1204(a) (McKinney 2000) provides in pertinent part:

Subject to the provisions of subsection (e) hereof, no person, firm, association or corporation shall in this state sell or propose to sell to the public any security issued by any insurer not authorized to do business in this state, unless licensed to do so under this section…. (emphasis added).

N.Y. Ins. Law 1204(f)(2) (McKinney 2000) provides:

(f)(2) The superintendent may by order or regulation exempt any other security or class thereof from all or part of this section on such terms and conditions as he deems appropriate upon a finding that its application thereto is not necessary to protect the public.

Under the authority of N.Y. Ins. Law 1204(f)(2) (McKinney 2000), the Superintendent of Insurance has promulgated N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2 (1995) (Regulation 44) which, among other things, exempts certain securities or classes of securities from the requirements of Section 1204 (McKinney 2000). Thus, an unlicensed foreign insurer may make a private placement in New York without a license, if such placement falls within one of the exemptions delineated in N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2 (1995) (Regulation 44). That section, entitled "Exemptions," provides, in pertinent part:

Pursuant to [paragraph (f)(2)] of section [1204], the application of section [1204] with respect to the following securities and transactions is determined not to be necessary for the protection of the public and, accordingly, such securities and transactions are herewith exempted from the provisions of section [1204], except as provided in subdivisions (b) and (c) hereof:

(5) Any offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in the Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional buyer, whether the purchaser is acting for itself or in some fiduciary capacity.

(c) Within 30 days following the commencement of any exempt offering by an insurer, such insurer shall file with the superintendent, for information purposes, a copy of the principal prospectus or similar offering circular, if any, used for purposes of the offering. (emphasis added).

The inquirer states that his client is an unlicensed Florida mutual insurer and that the placement in question "will be done as a Rule 144A, or a private placement, only to the category of people listed in Section 7.2(a)(5) of Regulation No. 44." In other words, the inquirer will make a private placement with "qualified institutional buyers," as that term is defined in Rule 144A of the Securities Act of 1933 and the transaction is exempt from the registration requirements therein. Accordingly, this placement will be offered to an institutional investor acting for itself or in a fiduciary capacity, not to the general public which Section 1204 seeks to protect. Such notes are, therefore, exempt from the requirements of N.Y. Ins. Law § 1204 (McKinney 2000).

Thus, in making a private placement of surplus notes with the institutional investors found in N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(a)(5) (1995) (Regulation 44), the unlicensed Florida mutual insurer in question will only need to file the offering memorandum with the Department within 30 days of the placement pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(c) (1995) (Regulation 44).

The above opinion is informal and not binding on any court. For further information you may contact Senior Attorney D. Monica Marsh at the New York City Office.